Please help us continue to provide you with free, quality journalism by turning off your ad blocker on our site.

Thank you for signing in.

If this is your first time registering, please check your inbox for more information about the benefits of your Forbes account and what you can do next!

I agree to receive occasional updates and announcements about Forbes products and services. You may opt out at any time.

I'd like to receive the Forbes Daily Dozen newsletter to get the top 12 headlines every morning.

Forbes takes privacy seriously and is committed to transparency. We will never share your email address with third parties without your permission. By signing in, you are indicating that you accept our Terms of Service and Privacy Statement.

Now, a group of researchers have come up with what they claim is a cheaper and more energy efficient way to mine bitcoin that could mean the previous bitcoin price floor moves far lower.

Bitcoin are rewarded to miners who contribute to the bitcoin network's encryption process but the ... [+] costs of doing so are high. Some think these high costs have added bitcoin's massive price increase over recent years.

Earlier this month, Michael Dubrovsky, cofounder of the nonprofit foundation PoWx, Marshall Ball from Columbia University in New York, and Bogdan Penkovsky of the University of Paris-Saclay in France, published a paper that claims a switch to photonic-chips, optical computers, and a revised encryption protocol, called HeavyHash, could make bitcoin mining less energy-hungry and, in turn, cheaper.

"Heavy reliance on electricity has created scalability issues, environmental concerns, and systemic risks" for bitcoin, the researchers wrote, arguing bitcoin's so-called proof of work, which is how bitcoin miners' work is measured and rewarded with bitcoin, should be replaced with what they call an optical proof of work algorithm.

"Mining efforts have concentrated in areas with low electricity costs, creating single points of failure. Although proof of work security properties rely on imposing a trivially verifiable economic cost on miners, there is no fundamental reason for it to consist primarily of electricity cost."

Bitcoin's huge energy costs have been a worry for the crypto industry for some time. This summer, researchers at Cambridge University found bitcoin consumes more energy than the whole of Switzerland.

The global bitcoin network was found to require more than seven gigawatts of electricity, adding up to around 64 terawatt hours of energy consumption over a year.

The newly suggested optical proof of work could "eliminate energy as the primary cost of mining," moving the cost of bitcoin mining to hardware, rather than electricity.

According to Dubrovsky and his colleagues, a switch to optical proof of work, made possible by "rapid growth and improvement in silicon photonics over the last two decades," would also improve network scalability, enable decentralized mining outside of low electricity cost areas, democratize issuance, and prevent the bitcoin hashrate from being as sensitive to underlying coin price declines.

The bitcoin price fell as low as $3,000 per bitcoin late last year, which some think is as low as it ... [+] can go due to the mining cost of bitcoin.

Coinbase

If the price of bitcoin mining does move lower as a result of a change to optical proof of work, the bitcoin price could move below the $3,000 it dropped to 12 months ago before miners were forced to switch off their machines.

However, some in the bitcoin and cryptocurrency industry do not expect the bitcoin price to fall as low as it did last year again, meaning the price of bitcoin mining might not be tested.

"Currently the market is testing the lows, not because of China (the China news has been a thing since 2011 and it never really has any major sway on the market) but because we tested the highs, it's as simple as that," said George McDonaugh, managing director of publicly listed bitcoin, cryptocurrency, and blockchain investment firm KR1 .

"We essentially went from $5,000 dollars to $13,500 in 3 months and now, like the swing of a pendulum, the market wants to know where the bottom is again. In my opinion we are in the early stages of a bull market, you'll see that the bottom this time around is much higher than $5,000. We will find higher lows all the way back to all-time highs."

I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of Verdict.co.uk I reported

…

I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of Verdict.co.uk I reported on how technology is changing business, political trends, and the latest culture and lifestyle. I have covered the rise of bitcoin and cryptocurrency since 2012 and have charted its emergence as a niche technology into the greatest threat to the established financial system the world has ever seen and the most important new technology since the internet itself. I have worked and written for CityAM, the Financial Times, and the New Statesman, amongst others. Follow me on Twitter @billybambrough or email me on billyATbillybambrough.com.
Disclosure: I occasionally hold some small amount of bitcoin and other cryptocurrencies.